Determinants of Commitment and Opportunism of institutional investors’ behavior: an empirical investigation on robo-voting phenomena

Objectives. Recent research identifies a troubling number of institutional investors that automatically follow the advice of their proxy advisors so that they can prove to have complied with their fiduciary duties, in a practice known as robo-voting. Therefore, our central research questions are: How institutional investor’s characteristics could affect robo-voting phenomena? and How robo-voting phenomena could favor the creation of new opportunistic behavior, chancing the scope of shareholder engagement? Methodology. Our paper directly addresses these questions by using ANCOVA (Analysis of Covariance) to test the effect of characteristics of institutional investors on the dependent variable under study. We use a manually constructed sample of coverage information at 123 Annual General Meetings held by large Italian companies in the 4year period 2015 to 2018 and the voting reports of three proxy advisors. Findings. We show that such voting based on robo-voting phenomena is restricted to specific types of institutional investors and it may be highlighted a negative aspects of a duty to “demonstrate” engagement on the part of institutional investors. Specifically, this duty could depend on location, strategy and category of institutional investors. Research limits. We refer only to the Italian market and it may be considered as a peripheral market by investors. Practical implications. We argue that legal enforcement currently sits uncomfortably with the conceptual and operational spectrum of engagement duties, upon institutional investors and proxy advisors. Originality of the study. We think that is important to consider in a European context how to promote shareholder engagement in general and at the same time curb negative activism by some shareholders.